National Insurance Contributions Bill

Mel Stride Excerpts

Thursday 13th January 2011 Commons Chamber

[Mr Gauke]

My hon. Friend is absolutely right. He brings a great deal of business experience to the subject. Trying to pick out individual constituencies in the way in which the right hon. Member for Delyn intends will add little to our understanding of the operation of the scheme, but, as a Government, we are keen to put out more information and to make the scheme transparent.

[Mel Stride (Central Devon) (Con)]

Does my hon. Friend agree with Mr Mitah from HMRC who pointed out in Committee that the greater complexity and costs involved in the sub-regional route would damage the scheme overall? He said:

“If you have a system that required us to operate a more complicated, or a narrower, range of areas, by reference to which we were giving relief, that would raise the costs of compliance substantially.”––[Official Report, National Insurance Contributions Public Bill Committee, 2 December 2010; c. 35-6, Q121.]

[Mr Gauke]

My hon. Friend is absolutely right. Certain compliance problems would arise. Could we tell whether an address was for work or home? The scheme would become more complicated. Those claiming would need to ensure that they were in one particular postcode area or another, and there would be issues with boundaries. Distortions could be much greater than under the simpler scheme that we have introduced with essentially one boundary and three excluded regions. A host of difficulties would arise if we tried to follow the sub-regional route. Where would we draw the line? Would we end up considering boroughs, wards or polling districts? Exactly how would that work? We will revert to the matter later, but my hon. Friend is right.

Amendments 5 and 6 are aimed at providing flexibility to reduce the duration of the regional employer national insurance contributions holiday for new businesses. This would reduce the cost of the holiday to the Exchequer, and correspondingly reduce the benefit to new businesses. As I have explained, the Government want to target available resources to the regions most dependent on public sector employment. We do not intend to widen geographical coverage, and therefore have no need to find ways of reducing costs. We know that this scheme will reduce labour costs for new businesses, and has been widely welcomed by their representatives.

We have acknowledged that beyond this there is a good deal of uncertainty about exactly how the scheme will pan out in practice. However, introducing some flexibility to change the details of the scheme as proposed in these amendments would increase uncertainty for those who might potentially benefit, and could risk inhibiting decision making. This particular proposal could affect those who are already benefiting from the scheme, or those who are currently considering setting up a new business bearing in mind the Government’s policy. For example, a new business set up this month, which plans to take on employees towards the end of this year, would not get the full year’s holiday for these employees if we were to stop the scheme in September 2012.

I hope that the right hon. Member for Delyn would agree that we were right to start operating the scheme as soon as we could, in anticipation of legislation being passed. Had we not done so, the benefit to businesses would have been delayed, and new businesses that had planned to start operation might have delayed in order to benefit fully from the scheme. I am conscious of the fact that the scheme requires the consent of Parliament, and we have been very clear about that in our guidance to potential beneficiaries. We are not pre-empting the decisions of Parliament. However, I hope that hon. Members would agree that it would not be desirable to withdraw the benefits we had planned to give to entrepreneurs who have already decided to set up in business. That risk applies to these amendments, and I am advised that as drafted the amendment is insufficient to provide a mechanism for extending the holiday, and does not therefore meet the intended aim.

With the commitment I have made today on the reports, I hope that the right hon. Gentleman will withdraw new clause 1 and, in the light of my comments, not press amendments 5 and 6.

--- Later in debate ---

First and foremost, we know that the NHS needs more money; it has always needed further investment. Indeed, in 2002, the Wanless report set out some of the challenges that our generation of parliamentarians will face in supporting the national health service. More recently, the King’s Fund has highlighted the massive financial pressures on the NHS as it seeks both to make efficiency savings and to deal with the impact of inflation on the cost of treatments. I note that the King’s Fund estimates that the Government’s VAT rise will cost the NHS an estimated £200 million to £300 million every year. In Committee, the Minister argued that the Bill will reduce the amount of national insurance overall that the NHS has to pay by £200 million a year, so it is interesting to note that that reduction will be swallowed up by an increase in expenditure as a result of the rise in VAT that the Government have introduced. That is before we get to the cost of the planned reorganisation. We must ensure that the NHS has as much funding as it needs to meet its obligations, notwithstanding the promises and pledges that the Government have made.

[Mel Stride]

Does the hon. Lady accept that, irrespective of whether the amendment is accepted, the Government have the ability to provide whatever level of resourcing for the national health service that they deem fit?

[Dr Creasy]

The hon. Gentleman raises the interesting question of how we guarantee that. That is precisely the point that I am coming to, because his Government made a pledge to my Walthamstow constituents that they would “cut the deficit, not the NHS”. As my right hon. Friend the Member for Wentworth and Dearne (John Healey) has set out in his remarks, there is some uncertainty over whether that is the case. Indeed, we could be seeing cuts in the NHS unless we can be sure that the money it needs will be generated. The amendment provides the Government with an opportunity to show how and why they will do so and to consider hypothecation through the national insurance contributions fund, which has been accepted as a principle across the House, to ensure that the money is provided.

There has been sleight of hand in the investment promised by this Government for the NHS through the attribution to social care. As a former local councillor I know that social care is one of the largest costs that any local authority will face, so the cuts that we have seen in local authority budgets over the last couple of months raise severe questions about the ability to deal with adult social care—even before we consider its relationship to health care at local level. It is very clear to me that there are real concerns about the funding that will go to the NHS in the years ahead.

The amendment would mean that we could all have confidence in the fact that money would go to the NHS budget, about which I know Members across the House care, so that the real-terms increase that my constituents and the Minister’s constituents were promised can be made good—not to mention concerns about job losses in the NHS as a direct result of some of this Government’s policies. If Government policy is about job creation and the Bill is about ensuring that people are employed and the economy is in recovery, cuts in the NHS that will lead to job losses will provide a real challenge. The amendment is designed to make sure that, given the pressures on its budget, the NHS has the money that it needs, and that the public’s expectation, which is reasonable and proportionate given the statements made by Ministers both before and after the general election, will be met.

I note in particular that before the election the Chancellor was very concerned about what the national insurance contribution rise might do to the NHS budget. I am sad to see that the Chancellor is not in his place today; I wish he was here to talk to us. I know that my right hon. Friend the Member for Wentworth and Dearne wrote to him, encouraging him to participate in today’s debate. The Chancellor should apply the same degree of concern to ensuring that the money is there for the NHS.

As a member of the Public Accounts Committee, which deals with the National Audit Office, I particularly support the amendment. The amendment would involve the NAO, which has a strong track record of ensuring not just probity but value for money. It is a key concern for us all in these times of economic austerity to ensure that the money goes to the front line in the NHS, that there is a real-terms increase, as we have been promised, and that the Government are held to account if we do not get that, because my constituents living in a poor area such as Walthamstow are already losing out by not getting the national insurance holiday and should at least have confidence that when national insurance contributions go up, the money will go to the NHS, as many of us hope.

I hope that the Government will accept the amendment. It is a reasonable amendment to help the Government keep their promise to the people of Britain that the money goes to the NHS so that we can all have confidence that the NHS will thrive in the years to come.